Sherman Anti-trust in the 21st Century
Whilst approaching the Twenty-first Century, America has taken significant strides in the advancement of high technology. With the unveiling of this new frontier comes continued innovation and government regulation. One aspect of the government in particular, the Sherman Anti-Trust Act of 1890, has impeded the progress of exploration into this new field; for the effectiveness of government is a nefarious hindrance to the efficiency of technology. Thus comes the age old question of who governs and to what ends. As a solution government should adopt a more Adam Smith approach to the regulation of high technology; the Sherman Anti-Trust Act should be amended by the legislature to allow more leeway for the technological and dynamic computer industry. The result of such an amendment, especially in a world economy such as ours, would allow American computer companies to thrive and compete with foreign companies as well as lead the way into the technological future of the Twenty-first Century.
In the age of reform as a result of public sentiment, Congress passed the Sherman Anti-Trust Act of 1890, named for Senator John Sherman. The one hundred and eight year old Sherman Act forbids monopolizing a market or engaging in any “restraint of trade.” Today “unlawful restraints” fall under three categories: 1) having too large a market share; 2) tying the sale of one product to another; 3) predatory pricing. For the past century the federal government has been pursuing a populist attack on big businesses–RCA, U.S. Steel, IBM, AT&T, Brown Shoe, A&P, etc. Most of the companies were ahead of their time and their competitors allowing them to become a successful, albeit big, businesses; however, due to government intervention and anti-trust investigation on the basis of the outdated Sherman Act, many of these cutting edge businesses were hindered in their progress for success. The market became a better trustbuster than the Department of Justice, maybe even better than big-stick, trust-busting Teddy Roosevelt.
In 1969 the International Business Machines Corp. dominated the market with a 65% share of the computer industry. As a result of this success, the U.S. government sued IBM for having too large a market share and demanded the company be dismantled. As the “effectiveness” of government and the Sherman Anti-Trust Act were played out in the courts the advancement of technology increased significantly with new companies sprouting up (i.e. Intel, Microsoft). After the battle between IBM and the Justice Department was dropped in 1982, 13 years later, the fiercely dynamic computer industry had already checked the growth of IBM and the once monolithic enterprise was now headed into troubled waters. Another prime example is General Motors, who although were never investigated by the government for anti-trust, always had the fear of encountering the trust problem if they were too successful. Consequently automobile technology and manufacturing in America remained dormant while the Japanese in the 1980s rocked the American market.
The current mammoth corporation under the Justice Department anti-trust microscope is Microsoft. This software oriented company stands accused of tying the sale of one product to the sale of another (Microsoft operating system and Internet Explorer) and predatory pricing. The following table illustrates the historic timeline of Microsoft verses the United States government.
August 1993The Justice Department begins investigating Microsoft’s business practices.
October 1994Microsoft announces plans to buy Intuit, developer of Quicken, the leading personal finance program. When the Justice Department sues to block the acquisition, Microsoft calls off the deal.
June 1995Court upholds the Justice Department/Microsoft consent decree. Microsoft agrees not to tie the licensing of Windows to the licensing of other applications, but retains the right to develop “integrated products.”
September 1996The Justice Department begins investigating Microsoft’s bundling of Internet Explorer with Windows 95.
April 1997Justice Department investigates Micorsoft’s plan to buy WebTV Networks; later allows deal to go forward.
August 1997Justice Department reviews Microsoft’s investment in Apple Computer.
October 1997Department charges that by requiring computer vendors to load Internet Explorer on all systems, Micosoft is in violation of the 1995 consent decree.
December 1997U.S. District Court Judge Thomas P. Jackson orders that the “tying” of IE 4.0 to Windows be temporarily halted. Microsoft appeals.
On December 11, 1997, Judge Jackson’s ruling against Microsoft could forever alter the technological landscape. If the United States government were to succeed in its efforts it would establish a risky precedent: governmental meddling in software development. In his testimony to Congress, Mr. Gates asked members of the Senate Judiciary Committee, “Will the United States continue its breathtaking technological advances? I believe the answer is yes–if innovation is not restricted by government.” Chairman, Senator Orrin G. Hatch (R. Utah), and other committee members heard from six computer industry figures on March 3, 1998. Microsoft asserts that Explorer is not a separate product but an “integrated feature” of Windows–and thus an allowable improvement to the operating system under the consent decree.
By having the legislature modify the antiquated anti-trust law to accommodate the rapid technological pace two things will happen. The first of which is the efficiency and innovation of the computer industry will be able to run its course and reach its full potential with limited government intervention. Secondly, the effectiveness of the Judiciary in regulating trusts will not be compromised, only shifted to a new arena, one which is acclimatized to the digital age.
Robert Bork, an eminent legal philosopher, points out in his 1978 book The Antitrust Paradox, “The general movement has been away from the ideal of competition and toward the older idea of protected status for each producer, away from concern for interest groups, and away form the ideal of liberty toward the ideal of enforced equality.”
Hopefully, by amending the current law to stay in tune with our technologically advancing society the opposite of what Bork commented on will be true.